These Are The Best And Worst Places To Bank

The banking world is full of good news and bad news these days.
But the news is better in some states than in others.

Nationally, the good news is that the banking system is more
stable now than in recent years. According to the FDIC, there
were 51 bank failures in 2012. This is less than 1 percent of all
FDIC-insured institutions, and those 51 failures represent a
significant improvement from the 92 in 2011, and the 157 in 2010.

The bad news is that savings
account rates remain low, and cost-cutting has caused
customer service to suffer at some banks. But how acutely you
feel these problems may depend on where you live.

Mapping the banking landscape

For better or worse, banking conditions are largely a function of
where you look. For example, 33 states had no banks fail in 2012,
while Georgia had 10 -- nearly one-fifth of the national total.

To see how banking conditions stack up from state to state,
MoneyRates.com has rated the 10 best and 10 worst states for
banking based on the following factors:

Customer satisfaction. This is based on
Toluna survey data exclusive to MoneyRates.com.

Stability. MoneyRates compared the number
of 2012 bank failures in each state to the total banks based in
that state.

Size of the banking community. Though
this was used only as a tie-breaker, the premise is that a
larger banking community means more choices for consumers.

The 10 best states for banking

Based on the criteria described above, here are the 10 best
states for banking:

Ohio. Ohio residents gave their banks the
fifth-highest average score for customer satisfaction. In
addition, there were no failures of Ohio-based banks in 2012,
so Ohio also scored well for stability. As a bonus, Nationwide
Bank, which made the top 10 for money market rates in the most
recent MoneyRates.com America's Best Rates survey, is based in
the state.

Kentucky. Kentucky's average satisfaction
score ranked just behind Ohio's, and it also had no bank
failures in 2012.

Louisiana. Louisiana finished with the
same overall score as Kentucky, with their rankings being
decided by the tie-breaker based on the number of banks based
in the state.

Montana. Montana scored very high on
customer satisfaction, and it also experienced no bank
failures. But with relatively few banks based in the state, the
latter did not weigh as heavily in the final score.

West Virginia. A very similar story to
Montana, with high customer satisfaction and no bank failures,
albeit with a relatively small banking community.

New York. Banks in New York received an
above-average score in satisfaction, and the state saw no bank
failures in 2012 out of the 175 institutions based there. New
York is also home to more than 250 offices of Capital
One Bank, which made the top 10 for savings account rates
in the latest America's Best Rates Survey.

Virginia. In addition to scoring well for
customer satisfaction and having no failures in 2012, Virginia
is also home to two of the top banks in the America's Best
Rates Survey: Capital One and Acacia Federal Savings Bank.

North Dakota. North Dakota finished in a
virtual tie with Virginia, with Virginia winning the
tie-breaker due to its larger banking community.

Colorado. In addition to having no bank
failures in 2012 and earning an above-average score for
customer satisfaction, Colorado is home to Mile High Banks, a
regular on the America's Best Rates top-10 lists.

Texas. Texas scored slightly
below-average on the satisfaction survey, but gets top marks
for stability because it had no failures in 2012, despite being
home to more than 500 banks. Texas residents also benefit from
having access to branches of Capital One, whose rates often
place it in the America's Best Rates top 10.

The 10 worst states for banking

So much for the good news. Here are the ten worst states for
banking, from the very worst to the 10th-worst:

Illinois. Illinois had the 10th-worst
score for customer satisfaction, and the state was home to
eight bank failures in 2012.

South Carolina. This state had a
below-average rating for customer satisfaction and was home to
two bank failures in 2012. That may not sound like many, but
South Carolina does not have a particularly large banking
community.

Oklahoma. Oklahoma edged out South
Carolina only by virtue of the tie-breaker.

Minnesota. Besides scoring poorly in the
customer satisfaction survey, Minnesota was home to four bank
failures in 2012.

Georgia. Georgia led the nation in bank
failures in 2012, with 10.

Rhode Island. Rhode Island had one of the
lowest scores for customer satisfaction.

North Carolina. With a below-average
score for customer satisfaction and the failure of one of its
banks in 2012, North Carolina only beat out Rhode Island by
virtue of the tie-breaker.

New Hampshire. New Hampshire's small
banking community saw no failures in 2012, but earned one of
the worst scores for customer satisfaction.

Hawaii. Hawaii has a very small banking
community, and it scored poorly for customer satisfaction.

Indiana. Indiana suffered a bank failure
in 2012, and also had a below-average score for customer
satisfaction.

If your state is on the worst list, it doesn't mean you need to
move to find a suitable bank. Instead, you may seek a community
bank or credit union that defies the overall environment of your
state, or consider
an online bank, most of which are available to residents
throughout the country. According to recent MoneyRates.com
research, you may also find higher rates and lower fees if you
choose an online bank.

With the numerous banking options available today, settling for a
mediocre financial institution makes little sense -- regardless
of where you call home.